Indiana House Democrats want to eliminate state sales tax on gasoline

November 27, 2006

INDIANAPOLIS (AP) Â? Democrats who control the Indiana House want to eliminate the state's sales tax on gasoline, but Republicans who control the Indiana Senate are skeptical.

Senate Republicans say it's unlikely the proposal would become law. Exempting gasoline from the state's 6 percent sales tax could cost the state as much as $300 million a year, according to Republicans, while saving drivers only a few cents at a time.

"It could be looked at," said Sen. Luke Kenley, R-Noblesville, chairman of the Senate Tax and Fiscal Policy Committee. "But I don't see that it's on the table right now at all."

House Democrats first suggested eliminating the sales tax on gas in August, when gas prices were about $3 a gallon.

Indiana charges the 6 percent sales tax on the base price of gas, not including the state and federal excise taxes. Democrats said eliminating the state sales tax would save drivers about 16 cents per gallon if the pump price is $3 a gallon. Democrats estimated the average driver would save about $150 a year.

But Republicans say gas prices have since fallen. Kenley said reducing property taxes would be a bigger impact on most families.

But House Speaker Pat Bauer, D-South Bend, said gas prices could increase if international instability continues. Although all states impose an excise tax on gasoline, Indiana is one of only seven that charge an additional sales tax.

"You shouldn't run your state on proceeds from gouging," Bauer said. "We want to see what we can do to help the average person."

Gov. Mitch Daniels, a Republican, also opposes the Democrats' plan. He said there is no evidence to show that tax revenues increase because of higher gas prices. He said as people have to pay more for gas, they spend less on other things, which cancels out any tax gain for the state.

Bauer said that if the sales tax on gas is eliminated, Hoosiers will pay less to drive and can spend more money elsewhere.